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Latest Lending Club ABS to test the market

Loans
By Sasha Padbidri
30 Nov 2016

A deal backed by near-prime Lending Club loans issued by Jefferies will be a test for the state of the marketplace lending industry after a wave of reported losses on some outstanding deals.

The 101.75m deal, LCIT 2016-NP2, is the first rated offering from the LCIT shelf. 

Sources speaking to GlobalCapital on Wednesday said the deal could reflect whether investors had been put off by recent reports of several outstanding marketplace loan securitizations breaching their loss triggers earlier than expected.

“It will be a carefully watched deal for not just Jefferies and Lending Club but also the market,” said an ABS lawyer. “You wonder how much this deal will tell you about how it is going to perform.”

Over the past two months, it was reported that at least five deals breached performance triggers, including AMPLT 2015-A, a joint securitization backed by loans from subprime online lender Avant and brought by KKR and Victory Park Capital, and MPLT 2015-CB1, backed by loans from CircleBack Lending and sold by Jefferies last May.

However, the lawyer added that the recent news about the loss triggers “should not be a surprise”, saying such outcomes were the result of the sector being relatively new.

“There was such euphoria about this sector initially. It’s not a surprise that things are coming back to Earth. This is a new business model and there’s bound to be some shakeout. How this sector eventually designs its business model is still pretty much open to question,” the lawyer said.

A marketplace loan banker said the rating for the deal would draw more buyers, even though investors snapped up bonds from the last unrated Lending Club deal. 

“Arguably this is good for the shelf, as it would broaden the buyer base. Even though there was good reception of the previous deal, you’re going to get better pricing with the rating on it,” said the banker.

Kroll Bond Rating Agency has assigned preliminary ratings of BBB to the $85.34m ‘A’ notes, and a BB+ to the $16.411m ‘B’ notes. Borrowers in the collateral pool feature a weighted average Fico score of 640, while the weighted average loan term is 39 months.

The deal is expected to be priced by the end of the week.

By Sasha Padbidri
30 Nov 2016